The reputed godfather of the Mexican Mafia prison gang and another alleged syndicate leader pleaded not guilty Monday to federal charges that they helped direct a ruthless move to control narcotics trafficking among hundreds of Latino street gangs from behind bars at the state's maximum-security prison in Pelican Bay.

Benjamin (Topo) Peters, 54, described by law enforcement sources as the godfather of the Mexican Mafia, is charged with crimes including conspiracy to murder rivals who stood in the way of the prison gang's alleged efforts to flex its muscle on the streets of Southern California. He and suspected Mexican Mafia leader Ruben (Tupi) Hernandez, 35, were transported from Pelican Bay in Crescent City in Northern California to U.S. District Court in Los Angeles, where they entered pleas amid a packed courtroom and tight security.

Hernandez is charged with furthering racketeering efforts by helping to direct the collection of drug "taxes" from street gangs. Also pleading not guilty at the hearing was reputed Mexican Mafia enforcer Daniel (Black Dan) Barela, 49, charged with conspiring to commit murder and distributing narcotics.

The men are among 22 suspected Mexican Mafia members and associates indicted on April 26 under the federal Racketeering Influenced and Corrupt Organizations (RICO) Act.

In announcing the sweeping indictment, federal officials said the action dealt a major blow to the clandestine organization, which for years has controlled prostitution, gambling and drug dealing in the California penal system. But authorities monitoring the prison gang's street activity say other members have filled the void and continue to collect drug "taxes" across Los Angeles County. "They are back into the action," one law enforcement official said. "It's business as usual."

The 26-count indictment alleges that the Mexican Mafia--known as La EME, Spanish for the letter M--controlled drug trafficking by taxing street gangs in exchange for protection. Those who defied the Mexican Mafia's efforts, the indictment contends, were killed, kidnaped or assaulted.

Much of the activity, according to the indictment, was directed by suspected Mexican Mafia members from behind bars.

Peters, for instance, is charged with helping to plot the March, 1992, slaying of Charles (Charlie Brown) Manriquez, who served as a consultant for Edward James Olmos' Mexican Mafia movie "American Me." Authorities say Manriquez was one of two "American Me" consultants killed by Mexican Mafia members, who felt the movie was disrespectful.

According to law enforcement sources, imprisoned Mexican Mafia members passed orders through "mail drops" and three-way telephone conversations. Relying on the Postal Service, the sources said, gang operatives using fake names would rent a mailbox where Mafia-related correspondence was sent. And when prison gang members made outside calls, the sources said, the person on the other end would set up a conference call with a third party.

The short, bespectacled Peters, who looks more like a grandfather than a godfather, was sentenced to 25 years to life in 1980 for the murder of a man at a Lincoln Heights dance hall. The man, court records show, had asked a woman who was with Peters to dance.

During the hearing, Peters chatted casually with Hernandez, who correctional officials allege is among the leaders of the second generation of the Mexican Mafia, which formed behind bars in the late 1950s.

A conviction under the RICO Act, authorities say, would allow both men to be transferred to a federal prison far from the gang's power base in the state penal system.

Hernandez's sister, Charlene Andrade, attended the hearing and disputed the charges against her brother in an interview. "They are nothing but lies," she said.